[00:00:02] Speaker 00: Our next case is Lockheed Martin Aeronautics Company versus Secretary of the Air Force, number 22-1035. [00:00:09] Speaker 00: Mr. Matheson, you've reserved three minutes of time for rebuttal. [00:00:16] Speaker 00: Is that correct? [00:00:17] Speaker 00: OK. [00:00:17] Speaker 00: We're ready when you are. [00:00:19] Speaker 04: May it please the court, Your Honors, Scott Matheson for Appellant Lockheed Martin. [00:00:23] Speaker 04: The defundization clause of our contract says that the government may determine a fixed price, a reasonable fixed price for the contract. [00:00:31] Speaker 04: And if they do so, then the plain language tells us that that decision, that determination. [00:00:37] Speaker 00: Let me ask you a couple, just some preliminary type questions. [00:00:43] Speaker 00: Have you filed a contractor's claim in the cases? [00:00:48] Speaker 00: I understand that there has been, right, for each, for the Korea project and the Singapore project. [00:00:53] Speaker 04: Subject to the dismissal of the board after that we filed a monetary claim. [00:00:57] Speaker 00: Yes, okay And and you haven't taken any action other than receive the denial from the contractor We are in ASPCA litigation in the early stage Okay, so it's it's at the board. [00:01:10] Speaker 00: Yes, your honor So we have two cases that are dealing with the same subject [00:01:15] Speaker 03: Wait, so you've already filed contractors' claims on both of these cases. [00:01:19] Speaker 03: You've already gotten a contracting officer's final decision, presumably not agreeing with you. [00:01:25] Speaker 03: And you're already in litigation at the board over what's a fair and reasonable price? [00:01:30] Speaker 04: Your Honor, if I can correct, there's not two contractor claims. [00:01:34] Speaker 04: There's one government claim that we appealed immediately as the plain language says we can. [00:01:38] Speaker 03: And I don't want to talk about this. [00:01:40] Speaker 03: What's going on with it? [00:01:42] Speaker 03: I thought you said after this case, you filed actual claims. [00:01:47] Speaker 04: Correct. [00:01:48] Speaker 03: directed to these definitions. [00:01:50] Speaker 04: Yes, Your Honor. [00:01:50] Speaker 04: Those are contractor monetary claims. [00:01:52] Speaker 04: So after we appealed the government's decision, got dismissed, we then filed a contractor monetary claim. [00:01:57] Speaker 04: And that's at the board in litigation. [00:01:59] Speaker 03: What do you mean when you say contractor monetary claim? [00:02:02] Speaker 04: So a contractor monetary claim. [00:02:03] Speaker 03: Because the government set out a price here. [00:02:06] Speaker 03: What is your claim with regard to that? [00:02:08] Speaker 03: Are you saying the price should be bigger or that you deserve more money under the contract? [00:02:14] Speaker 04: Your Honor, the contractor monetary claim sets forth the actual incurred and expected forecasted cost, sets forth what a reasonable price could be. [00:02:22] Speaker 04: That is distinct. [00:02:23] Speaker 04: It's a distinct request, claim, and remedy from what is at issue here from this appeal. [00:02:27] Speaker 04: This appeals the government's determination of a reasonable price. [00:02:30] Speaker 04: It needs to follow the correct standards, apply the correct standards, reasonable. [00:02:35] Speaker 00: But it's essentially the same issues, correct? [00:02:37] Speaker 00: The reasonableness of the definitive price [00:02:41] Speaker 04: No, Your Honor. [00:02:42] Speaker 04: They may share similarities, but they are wholly different in both the request and the remedy. [00:02:47] Speaker 00: I'm just wondering whether you've mooted this case. [00:02:51] Speaker 04: Your Honor, no. [00:02:52] Speaker 04: It's not moot. [00:02:53] Speaker 04: There's a live dispute still present in both actions. [00:02:57] Speaker 04: Lockheed Martin hasn't received a reasonable price in either action. [00:03:01] Speaker 04: We have an ongoing cognizable interest. [00:03:03] Speaker 00: There's a distinction between them. [00:03:04] Speaker 00: But you're basically arguing the same arguments. [00:03:06] Speaker 00: You bring it to us, you argue those arguments before the board. [00:03:10] Speaker 04: No, Your Honor, we're arguing it's a different claim. [00:03:12] Speaker 00: It's a different theory, but it's the same issue, it's the same contracts, correct? [00:03:16] Speaker 04: Same contracts, Your Honor, but this court's precedent and alliant, and Todd tells me. [00:03:20] Speaker 03: Let me ask you, I know you want to get to your argument, and you have interesting arguments. [00:03:27] Speaker 03: The end result is you have a price that you think is the reasonable price. [00:03:33] Speaker 03: It's not different in this case or the other case, is it? [00:03:36] Speaker 03: It's the same reasonable price. [00:03:38] Speaker 03: And you're going to put on proof whether you have to do it in this case if we were man to the board, or you have to do it in the contractor monetary claim. [00:03:46] Speaker 04: No, Your Honor. [00:03:46] Speaker 04: They're different. [00:03:47] Speaker 03: Because when the government- Tell me what the bottom line number, how is it different in these two cases of what you're seeking? [00:03:55] Speaker 04: Because, Your Honor, in this appeal from the government's decision, we are not seeking a number. [00:04:00] Speaker 04: We are not asking for money, and we are not seeking a price. [00:04:03] Speaker 04: What is at issue is whether the government applied the correct standards to arrive at its reasonable number, which is the remedial process the drafters enshrined in the divinization clauses, that they must pick the reasonable number. [00:04:14] Speaker 04: This is a declaration from the board that the government either did or did not apply the correct standards to vacate, allow the parties to go back and resolve it the way the far drafters intended where the parties can resolve it. [00:04:25] Speaker 03: Now that goes back to the process where the parties can either... That dispute is already in play in your other case because you've come in and said here's what we think the reasonable price is and what we think we're deserved. [00:04:38] Speaker 03: But respectfully, Your Honor, it's different because the issue at the board is not the price that we... If we vacate this case and send it back and the board says, oh, the government's price is unreasonable, are you going to go back to the government and say, oh, well, we want a different number than we already asked you for? [00:04:52] Speaker 04: On the merits, Your Honor, if the board sides with the government, then that would likely end the process. [00:04:57] Speaker 03: You're not really addressing what we're honestly annoyed with here, which is, why didn't you just file a contractor claim in the first place? [00:05:05] Speaker 03: Is this all about the burden of proof? [00:05:07] Speaker 04: No, Your Honor. [00:05:07] Speaker 04: It's about the plain language. [00:05:09] Speaker 03: No. [00:05:09] Speaker 03: I mean, the practical effect of this is you want a fair and reasonable price. [00:05:15] Speaker 03: You think the definitization the government gave you is not fair. [00:05:19] Speaker 03: And if it's a government claim, and you can appeal directly, and it goes to the board, they bear the burden of proof, right? [00:05:27] Speaker 04: Correct, Your Honor. [00:05:28] Speaker 03: And on the contractor claim that you submit to the CO for a final decision, and if you lose, you bear the burden of proof. [00:05:36] Speaker 04: Correct, Your Honor. [00:05:36] Speaker 04: But again, we're not seeking the price here. [00:05:38] Speaker 04: The board, and again, this is not unusual. [00:05:40] Speaker 04: It seems unusual, but it's not unusual. [00:05:42] Speaker 04: This court has already looked at the language that says the government's decision is directly appealable. [00:05:47] Speaker 04: And we've already addressed this in Alliant and in Todd Construction and in Garrett. [00:05:51] Speaker 03: It still has to be a government claim. [00:05:53] Speaker 03: to be appealable. [00:05:54] Speaker 04: Absolutely, Your Honor. [00:05:55] Speaker 04: It still needs to be a government claim. [00:05:56] Speaker 04: We know it's a government claim. [00:05:58] Speaker 00: And really, the laws are not that clear on that particular issue. [00:06:01] Speaker 04: We believe the law is very clear on this issue that it's a government claim. [00:06:04] Speaker 04: If I may. [00:06:04] Speaker 00: The question goes back, why didn't you just file, instead of arguing and taking this up, appealing directly on the basis that this is a government claim, why didn't you just file a claim with the contractor and go that way? [00:06:19] Speaker 04: Because this court's precedent tells us we don't need to. [00:06:22] Speaker 00: No, but practically, I'm concerned whether we're going to create a rule that says that parties don't have, for example, judicial review under a government contract claim or something of that nature. [00:06:41] Speaker 00: And I'm trying to understand from you, why did you pursue this route as opposed, which is not clear, [00:06:49] Speaker 00: And that's the government claim route, as opposed to just filing your claim before the contractor, getting a denial, and proceeding, just like you've already done. [00:06:59] Speaker 00: I mean, you've done that already. [00:07:01] Speaker 00: You've covered yourself in both options. [00:07:06] Speaker 00: And I think you have a problem. [00:07:10] Speaker 00: I mean, is our decision today going to affect one way or another the action before the board? [00:07:19] Speaker 00: or win our decision today? [00:07:22] Speaker 03: No, Your Honor. [00:07:23] Speaker 03: If we send this back to this board and say the board, can't the board just say, well, we're going to stay this part of the case, and we're just going to go ahead on the contractor claim and determine what the fair and reasonable price is? [00:07:34] Speaker 04: The merits are for the board, Your Honor. [00:07:36] Speaker 04: The jurisdiction is for this court. [00:07:37] Speaker 04: This is a government decision under both the plain language and this court's process. [00:07:41] Speaker 03: You're frustrating, at least me, because you're presenting theoretical arguments. [00:07:46] Speaker 03: And of course, the contractor community would love to create even more exceptions to getting a final contracting officer's decision. [00:07:55] Speaker 03: There is no doubt, because then you can go straight to the board. [00:07:59] Speaker 03: But practically speaking, you have the claim before the board that will resolve the underlying dispute, which is, how much should the government pay you for these contracts? [00:08:09] Speaker 03: It's there. [00:08:11] Speaker 03: And we wouldn't have had to engage in what is very difficult reasoning under difficult precedent that's not clear at all if you just filed a contractor claim in the first place. [00:08:25] Speaker 04: Respectfully, Your Honor, this court's precedent tells us we don't need to. [00:08:29] Speaker 03: I don't think that our precedent is anywhere as near as clear as you think it is. [00:08:33] Speaker 04: Right, Your Honor. [00:08:34] Speaker 03: So I know we've taken up most of your time asking you about the practical. [00:08:38] Speaker 03: What's the best case? [00:08:39] Speaker 03: And tell me the facts of that case. [00:08:42] Speaker 04: The best case, Your Honor, for the fact that a contracting officer's decision [00:08:47] Speaker 04: that says, when the language says a contracting officer's unilateral price determination is immediately appealable because it has that language subject to appeal, then the best case for that, James Ellic construction, Your Honor's decision, for the proposition that these government claims are not unusual and they exist. [00:09:02] Speaker 03: What was the government contractor's officer's decision in that case? [00:09:06] Speaker 04: There was a unilateral price determination with the same language subject to appeal. [00:09:10] Speaker 04: That's at page 1545 of James Ellic construction. [00:09:12] Speaker 03: A unilateral price determination that's did what? [00:09:15] Speaker 04: that set the price on a termination for convenience. [00:09:18] Speaker 04: That language has already been interpreted by this court. [00:09:20] Speaker 04: It means subject to appeal. [00:09:21] Speaker 04: So here, where is the claim? [00:09:24] Speaker 03: And that's when it's a price on a termination convenience. [00:09:28] Speaker 03: It says, we're terminating, and this is what we owe you or you owe us, right? [00:09:33] Speaker 03: Correct, Your Honor. [00:09:34] Speaker 03: So it is setting [00:09:36] Speaker 03: It is actually determining something that you're currently owed either adversely to, adversely to you. [00:09:42] Speaker 04: If I may, the language that I was saying for the proposition is that it's subject to the right of appeal. [00:09:47] Speaker 04: We immediately appealed, we followed the plain language. [00:09:49] Speaker 04: Yes, determination for convenience sets forth [00:09:51] Speaker 04: a different regulatory process, because it says the contractor must certify its settlement proposal. [00:09:56] Speaker 04: So it's a different process. [00:09:57] Speaker 04: The drafters know how to make something a contractor claim. [00:09:59] Speaker 04: They said it in a termination. [00:10:01] Speaker 04: The drafters know how to not make something. [00:10:02] Speaker 03: Are you relying on this language subject to right to appeal based on the disputes clause? [00:10:08] Speaker 03: Because the disputes clause doesn't excuse you from getting a final contracting officer's decision if it's a contractor claim. [00:10:20] Speaker 04: Your Honor, this Court has already interpreted what is subject to appeal as provided in the Disputes Clause mean. [00:10:26] Speaker 04: We've already interpreted that as provided in the Disputes Clause means how the appeal is taken under paragraph F of the Disputes Clause. [00:10:32] Speaker 04: That means to the Board or to the Court and make it timely. [00:10:34] Speaker 04: Disputes modifies how the appeal is taken. [00:10:38] Speaker 04: It doesn't say that this shall be a dispute in the Disputes Clause that you can appeal. [00:10:43] Speaker 04: We've already interpreted this language. [00:10:44] Speaker 04: Again, that's James L. at construction at page 1545. [00:10:46] Speaker 03: I think that's a very different kind [00:10:48] Speaker 03: final contracting officer's decision, we know that terminations for default by the contracting officer are a government claim because they adversely affect the contractor. [00:10:59] Speaker 03: We know that terminations for convenience that say the contractor owes us X dollars or we're only going to give you this amount of dollars adversely affects the contractors. [00:11:08] Speaker 03: How do we know [00:11:10] Speaker 03: that a definatized contract is adverse to you until you come in and say, that price is too low. [00:11:16] Speaker 03: And why should that be directed to the contracting officer in the first place? [00:11:22] Speaker 04: Because, Your Honor, first, if I may, it is clearly against us if this is an argument that the government made about it. [00:11:27] Speaker 03: We don't know it's against you until you say it's too low. [00:11:29] Speaker 04: No, Your Honor, because once the government asserts, unlike the changes clause or termination where the contractor asks for something, here the regulatory structure tells us that it's the government making its definization determined. [00:11:40] Speaker 04: The government is saying, I want to stop the process. [00:11:42] Speaker 04: This comes at the end of a very lengthy process. [00:11:44] Speaker 04: This is a final decision. [00:11:46] Speaker 04: We negotiated the price for five years. [00:11:48] Speaker 04: It's such a final decision that the contracting officer is not even entitled, herself or himself, to make this determination. [00:11:54] Speaker 04: The head of the contracting activity, the Deputy Assistant Secretary, needs to make [00:11:58] Speaker 04: This determination is a final government determination. [00:12:00] Speaker 00: The government made that determination. [00:12:03] Speaker 00: Did it make an adjustment to the underlying contract or did it make a modification? [00:12:08] Speaker 00: And is there any difference between the two? [00:12:10] Speaker 04: Your honor, we would argue that it made a modification and adjustment. [00:12:12] Speaker 04: We know it's a modification because they issued written modifications and those modifications adjusted the contract. [00:12:18] Speaker 04: How? [00:12:18] Speaker 04: The contract beforehand was a cost reimbursement structure. [00:12:22] Speaker 04: Lockheed Martin, there was no fixed prices. [00:12:24] Speaker 04: We performed the work. [00:12:24] Speaker 04: We were getting reimbursed. [00:12:26] Speaker 04: There was no harm. [00:12:27] Speaker 04: The government, by written modification, adjusted the entire contract. [00:12:30] Speaker 04: They removed the cost reimbursement structure. [00:12:33] Speaker 04: They removed all of the FAR clauses that related to the cost reimbursement structure. [00:12:36] Speaker 04: They inserted a raft of new clauses dealing with their new fixed price contract. [00:12:41] Speaker 04: And they inserted new fixed prices. [00:12:42] Speaker 04: It's a modification for sure. [00:12:44] Speaker 04: It fits with an adjustment under the plain language. [00:12:46] Speaker 04: And under this court's decision, an alliant of how broad an adjustment can be, and certainly the progeny down at the lower courts of how broad a government adjustment claim can be. [00:12:56] Speaker 04: We've argued, Your Honor, that this is cognizable as a FAR 2.101 adjustment type claim. [00:13:02] Speaker 04: This is clearly an adjustment. [00:13:03] Speaker 04: But even if we don't believe it's an adjustment, [00:13:05] Speaker 04: There's a residual clause, an other relief type of a claim, that it could be. [00:13:09] Speaker 04: And that court has already told us in Todd Construction, and in Garrett, and we've told us in Malone, that this is an extremely broad category. [00:13:16] Speaker 04: It's of substantial breadth, is what Todd Construction told us. [00:13:20] Speaker 04: Many things can fit in there. [00:13:21] Speaker 04: Is it defined in regulation? [00:13:23] Speaker 04: No. [00:13:24] Speaker 04: It's a residual clause that allows other types of things. [00:13:27] Speaker 04: Now, Your Honor's question of where we're analogous to, we're most analogous to Garrett, of why this court's decision in Garrett, of why we're an other relief type of a claim. [00:13:34] Speaker 04: In both this case and in Garrett, there was a contrary officer's direction to perform at a fixed price for no additional money. [00:13:41] Speaker 04: Both there and here were analogous. [00:13:43] Speaker 00: Let me jump in. [00:13:44] Speaker 00: We'll give you additional time. [00:13:46] Speaker 00: So hang in there. [00:13:51] Speaker 00: What effect does the Bell helicopter textual case have on this? [00:13:55] Speaker 04: None, Your Honor. [00:13:57] Speaker 04: Bell Helicopter was wrongly decided. [00:13:59] Speaker 04: And it was decided years before this court's precedent in James Ellic construction told us what the subject to appeal as provided in the speech clause language means. [00:14:07] Speaker 04: And it was decided before Malone and Garrett and Todd and Alliant that told us that other relief, government, other relief, non-monetary claims are broad of substantial breadth. [00:14:16] Speaker 04: Garrett, and not only that, that it predated those decisions. [00:14:19] Speaker 04: Bell Helicopter is simply wrong because it didn't grapple with the plain language. [00:14:22] Speaker 00: The reverse today. [00:14:23] Speaker 00: What happens to your claims before the board? [00:14:28] Speaker 04: If we reverse on this case, the claim that the board would continue. [00:14:32] Speaker 04: But we believe that that would be irreconcilable with this court's precedent in James Ellicott's instruction and in Alliant and in Todd that says, and again, to quote James Ellicott's instruction, [00:14:43] Speaker 04: A government claim exists regardless of whether a contractor could convert the claims to contractor monetary claims by doing the requested work and seeking compensation afterwards. [00:14:52] Speaker 04: That was the rule articulated in Garrett. [00:14:54] Speaker 04: That was the rule articulated in Alliant. [00:14:56] Speaker 04: The government makes the same argument in every single one of these cases. [00:14:59] Speaker 04: It's a practical argument, prudential. [00:15:01] Speaker 04: Why don't you just do something different? [00:15:03] Speaker 04: Our inquiry is not about what makes sense and what is practical. [00:15:06] Speaker 04: We're not the drafters. [00:15:07] Speaker 00: One thing that's clear in the law [00:15:10] Speaker 00: that the requirements that you have to make a claim before you have jurisdiction to get appellate jurisdiction. [00:15:23] Speaker 00: All that's clear. [00:15:25] Speaker 00: And you don't have a denial from the contracting officer. [00:15:30] Speaker 00: Well, you do now, but not when you file this case. [00:15:34] Speaker 00: So there's one part of the law that's clear. [00:15:38] Speaker 00: You didn't follow that part. [00:15:39] Speaker 00: You decided to go on this. [00:15:42] Speaker 00: You still haven't convinced me that... [00:15:45] Speaker 00: We're not looking at the same action in two different forms. [00:15:47] Speaker 04: Your Honor, let me have, please, 30 seconds to resolve this. [00:15:50] Speaker 04: Because a claim is either of two things. [00:15:54] Speaker 04: It is either a government's final decision in the first instance, without a requirement for a conscious claim, without a requirement for certification, a government decision that is final and appealable, directly appealable. [00:16:05] Speaker 04: That is a claim. [00:16:06] Speaker 04: You can immediately appeal it, both how the plain language tells us and the other type. [00:16:09] Speaker 00: I understand that you want us to rule that this is a government claim. [00:16:13] Speaker 00: I get that. [00:16:15] Speaker 00: But how is that different? [00:16:17] Speaker 00: I mean, the results of the action that's before the board and in this case, how are they different? [00:16:24] Speaker 00: I mean, you're seeking the same thing. [00:16:26] Speaker 00: You're seeking a reasonable price on behalf of your client. [00:16:30] Speaker 00: It comes down to dollars. [00:16:31] Speaker 00: You're seeking a reasonable price. [00:16:34] Speaker 00: If you're not, then I have problems with this case. [00:16:37] Speaker 00: If in this case, all you're seeking is validation of some legal theory without damages, [00:16:44] Speaker 00: then you have a different product. [00:16:46] Speaker 04: Your Honor, in this case, we're seeking the same thing that the contractor in Garrett sought, which is a declaration that the government's decision was unreasonable, so that I don't need to be harmed. [00:16:58] Speaker 04: That was the relief in Garrett. [00:16:59] Speaker 03: In Garrett, they ordered you to do extra work for no more money. [00:17:06] Speaker 03: In Alliant, they ordered you to do more work. [00:17:11] Speaker 03: Did this order you to do more work? [00:17:14] Speaker 03: It didn't expand the scope of the contract. [00:17:16] Speaker 03: It didn't tell you you have to do more work. [00:17:19] Speaker 03: It just set a price. [00:17:21] Speaker 04: It did more than that, Your Honor. [00:17:22] Speaker 04: The original arrangement says you can perform and get all of your costs reimbursed. [00:17:28] Speaker 04: The adjustment of the contract says, now you must perform under dispute the entire contract at this low price that we're imposing. [00:17:37] Speaker 04: It's a different structure. [00:17:38] Speaker 04: And so it does, just like Garrett. [00:17:39] Speaker 04: It imposes, it has a fixed price. [00:17:42] Speaker 04: And it says, we won't pay you any money above that fixed price. [00:17:44] Speaker 04: And now do this work. [00:17:45] Speaker 03: But it didn't require you to do [00:17:47] Speaker 03: more work for less money than you were promised because you weren't promised any set level of money at all. [00:17:54] Speaker 04: Your honor, what we were promised is the protections of the plain language of the clause. [00:17:58] Speaker 04: OK. [00:17:58] Speaker 04: And the prudential considerations are outside the jurisdictional lines that Congress draws. [00:18:03] Speaker 04: And the Congress, and as the drafters have enshrined, it's not a practical consideration for us. [00:18:07] Speaker 04: This comes down to an issue that the drafters have enshrined that the government makes a decision. [00:18:11] Speaker 04: The plain language does not require a contractor decision, a contractor claim before or after. [00:18:16] Speaker 04: There is no requirement for conscious claims. [00:18:17] Speaker 04: So where is the claim that is subject to appeal as provided in the Disputes Clause? [00:18:22] Speaker 04: It is the government's determination that comes at the end of a lengthy, five-year negotiation process that is approved by the Deputy Assistant Secretary. [00:18:30] Speaker 00: What's the relief? [00:18:31] Speaker 00: Ultimately, let's say you win here. [00:18:33] Speaker 00: What's the relief? [00:18:34] Speaker 04: The relief, Your Honor, is that the board looks at a much narrower set of issues and data, rather than the maximum possible set of areas to put into litigation. [00:18:45] Speaker 04: They look at a narrow set of issues. [00:18:46] Speaker 04: What decision did the government come to? [00:18:47] Speaker 04: How did they come to it? [00:18:48] Speaker 04: Did they apply the correct standard? [00:18:50] Speaker 04: Did they make disallowances that were actually consistent with FAR 31? [00:18:54] Speaker 00: And to what end does the board go through that analysis? [00:18:57] Speaker 04: just like in Garrett, to get a declaration that the government's decision was unreasonable to prevent the future harm. [00:19:04] Speaker 00: Which means more money for you. [00:19:06] Speaker 04: That's what you're seeking. [00:19:08] Speaker 04: Your honor, what we're seeking is to follow the process, to have the board vacate the price, allow the parties to return the status quo ante, and to now with the board's clear guidance of what the proper standard is. [00:19:18] Speaker 00: Tell me if I'm wrong, but it seems to me that what you're seeking is to have the opportunity [00:19:25] Speaker 00: to establish, one way or the other, with the burdens of Europe or the governments, to establish that the price that was definatized was not reasonable. [00:19:38] Speaker 00: That's your ultimate relief. [00:19:42] Speaker 04: The relief we're seeking, again, shall be fashioned by the board. [00:19:44] Speaker 04: That's irrelevant to our jurisdictional inquiry. [00:19:46] Speaker 04: But the relief that we're seeking is for the board to find, to examine how the government arrived at its decision. [00:19:51] Speaker 04: Did it arrive at it reasonably and apply the correct standards? [00:19:53] Speaker 04: The board can vacate that decision. [00:19:55] Speaker 04: The result is that it sends it back to the status quo ante. [00:19:58] Speaker 04: We're not seeking a price. [00:19:59] Speaker 04: We're seeking the opportunity to resume negotiations with the government, now with the board's clear guidance of what the correct standard is that can remove the roadblocks that we had before. [00:20:07] Speaker 03: If we send this back, the board is not going to set a price. [00:20:11] Speaker 03: Correct. [00:20:12] Speaker 03: At best, it's going to send it back to the CO to say, look at this again. [00:20:16] Speaker 04: At best, Your Honor, that's exactly what we're looking for. [00:20:18] Speaker 03: And the CO has already told you that it doesn't think what you think is right. [00:20:22] Speaker 04: And here we have the changed circumstance of the board's vacating of the price and the clear guidance of what the correct standard is, where the contracting officer erred in the past, and what the correct standard to apply is. [00:20:33] Speaker 04: And the contracting officer. [00:20:34] Speaker 03: And the contracting officer, in the contractor's claim that's at the board, there's a final decision. [00:20:40] Speaker 03: And the board is going to review that and go up or down on the number, right? [00:20:45] Speaker 03: And they're going to give you a final number in that case. [00:20:48] Speaker 04: That will be years later. [00:20:49] Speaker 04: But yes, Your Honor. [00:20:50] Speaker 04: But here. [00:20:50] Speaker 03: This is going to be years later too. [00:20:52] Speaker 04: Your Honor, we would posit that this is a much more efficient both from judicial efficiency and dispute resolution efficiency. [00:20:57] Speaker 03: It's certainly more efficient for you in terms of not having to [00:21:02] Speaker 03: get a final contracting officer's decision and then try to show error in it. [00:21:06] Speaker 03: But I'm not sure it's efficient for the overall process. [00:21:08] Speaker 04: Your Honor, respectfully, we received a contracting officer's final decision. [00:21:11] Speaker 04: It's a government claim. [00:21:12] Speaker 04: It's the government's determination after a five-year negotiation. [00:21:14] Speaker 03: I mean, you can keep saying that, but the whole point where all you're asking is, let's keep doing the negotiation process. [00:21:21] Speaker 03: I mean, that's the whole point of the Defendization Clause is the government cut it off and said, we can't agree. [00:21:26] Speaker 03: Here's the price. [00:21:27] Speaker 03: If you disagree, challenge it. [00:21:29] Speaker 04: This court's presumption is the government acts in good faith. [00:21:31] Speaker 04: We believe that with the board vacating the price and issuing declaration back, with the guidance back to the parties, the parties can absolutely, through the dispute resolution process envisioned by the FAR drafters, the parties can reach a reasonable price. [00:21:44] Speaker 04: either bilaterally or it makes sense to take it out of litigation rather think about the board the board and the contractor the contractors claim there's two billion dollars worth of cost data that the board is going to sit through there's 24 000 subcontracts there's terabytes of information [00:22:01] Speaker 04: that they're going to sift through. [00:22:02] Speaker 04: It'll be years before they reach a decision, then it gets published. [00:22:05] Speaker 04: This is a much more efficient to take it off of the judicial docket, the litigation docket, and to allow the parties to resolve it the way the far-drafters intended, which is bilaterally with the board's, now the changed circumstance of the board's clear guidance. [00:22:17] Speaker 00: I believe we have your argument, but I'll restore you in a little time, OK? [00:22:22] Speaker 00: Thank you, Your Honor. [00:22:23] Speaker 00: Thank you very much. [00:22:29] Speaker 02: Thank you, Your Honor. [00:22:30] Speaker 02: May it please the court, the Armed Services Board of Contract Appeals correctly concluded that it lacked jurisdiction. [00:22:35] Speaker 02: The Air Force determined and set reasonable prices for its contracts with Lockheed. [00:22:39] Speaker 02: This was not. [00:22:40] Speaker 00: What's the relationship? [00:22:41] Speaker 00: You heard the exchange that we've had with your friend. [00:22:48] Speaker 00: What's the effect of the board action on this and vise versa? [00:22:53] Speaker 02: Your Honor, we understood the board decision that the [00:22:59] Speaker 02: Definitizations were not government claims to leave open the possibility argued by Lockheed that if this were a government claim, it is a distinct animal from the contractor claims subsequently filed by Lockheed. [00:23:15] Speaker 02: However, we understand the court's concern about the potential for mootness. [00:23:21] Speaker 02: Also, certainly. [00:23:24] Speaker 00: Do you agree with that concern? [00:23:27] Speaker 02: It's a good question, Your Honor. [00:23:30] Speaker 02: We understood there to be a distinction. [00:23:32] Speaker 02: If Lockheed Martin were correct that this was a government claim, it would be a different animal generally than the contractor claims that it subsequently later submitted. [00:23:45] Speaker 03: Sure, but if the contractor claim, because they said they've got a final decision, they've appealed it to the board, in that case, the board's going to determine, aren't they, what the reasonable price is. [00:23:57] Speaker 02: The board will consider the question of the price. [00:24:01] Speaker 03: I mean, they're going to put on their proof as to why it should be higher. [00:24:04] Speaker 03: You're going to say by the contracting author's decision is right. [00:24:07] Speaker 03: It's not going to result in a remand. [00:24:09] Speaker 03: It's going to result in a decision on the merits of this is the proper price. [00:24:13] Speaker 03: And if they determine that, then what makes a difference if the government didn't do the right procedure here and we send it all the way back? [00:24:21] Speaker 03: Because he admitted that at best, it's just going to send it back to negotiate already. [00:24:26] Speaker 02: The only difference we understand would be the burden of proof. [00:24:31] Speaker 02: Does government have the burden to defend the entire price that it set, or does Lockheed Martin have the burden to point out the specific portions of that price with which it disagrees? [00:24:43] Speaker 02: And then that will certainly limit the issues before the board. [00:24:49] Speaker 02: Lockheed Martin's counsel said that [00:24:51] Speaker 02: that there will be a narrow set of issues if they prevail here. [00:24:54] Speaker 02: That's simply incorrect. [00:24:55] Speaker 02: There will be a much broader set of issues, because the government would have the burden to defend the entire price set. [00:25:01] Speaker 02: As Lockheed's counsel noted, it's a $2 billion project, and the government would end up having to defend that entire price when there is a very small difference between the price that Lockheed sought and the price that the government [00:25:17] Speaker 02: adopted as part of the definitization. [00:25:22] Speaker 03: Can I just ask you because I mean there is some facial appeal in some sense to their notion that this is a government claim because there is a process you negotiate the [00:25:34] Speaker 03: Just by definition, if the government steps in and unilaterally definitizes, it suggests that they haven't agreed and that the government's going to impose something that the contractor doesn't like. [00:25:46] Speaker 03: And so that's adverse in some sense to the contractor. [00:25:50] Speaker 03: And why doesn't that fall in line with a lot of our other cases, which have taken a more broad definition of what a government claim is as a decision that is, at least on some level, adverse to the contractor? [00:26:08] Speaker 02: Well, I'll start by noting the CDA language of the claim needing to be against the contractor [00:26:15] Speaker 02: And therefore, as the court said in Malone, adverse. [00:26:18] Speaker 02: It can't simply mean that there's a negative effect on the contractor. [00:26:21] Speaker 02: A change can have a negative effect on the contractor, but it's not considered a government claim. [00:26:27] Speaker 02: Instead, the contractor must submit a request for equitable adjustment. [00:26:30] Speaker 02: In Malone, the court noted that a written decision is required to be issued by the contracting officer here. [00:26:37] Speaker 02: issuance of a decision to the contractor. [00:26:42] Speaker 00: But there's been a modification of the underlying contract, correct? [00:26:46] Speaker 00: Correct. [00:26:47] Speaker 00: Does it matter whether we call that an adjustment or a modification? [00:26:51] Speaker 02: Well, I don't believe so, Your Honor. [00:26:55] Speaker 02: However, adjustment being a term in FAR 2.101, it could make a bit of a difference. [00:27:03] Speaker 02: However, this would not be a type of adjustment as described in 2.101. [00:27:07] Speaker 02: This would not be a written demand or assertion by the government seeking, as a matter of right, the adjustment of contract terms or other relief [00:27:19] Speaker 02: The government has simply followed a contract administration procedure that results in a contract and set a reasonable price. [00:27:26] Speaker 02: It wasn't asking to adjust contract terms. [00:27:29] Speaker 03: So I mean, your view is not all modifications or changes are necessarily government claims. [00:27:35] Speaker 03: Correct. [00:27:35] Speaker 03: So they could be, but they might not be. [00:27:38] Speaker 03: So hypothetically, if you have a contract and somebody's installing a brick wall, and the contract said this type of brick, and somebody at the contracting function or the underlying function says, we don't like that brick. [00:27:53] Speaker 03: We'd like to use this other brick. [00:27:55] Speaker 03: If the government issues a modification and says, use this other brick, is that a government claim? [00:28:02] Speaker 02: I don't believe so, Your Honor. [00:28:06] Speaker 02: It sounds more like a change that the government would have. [00:28:09] Speaker 03: And if the contractor wants to challenge that because it thinks it actually would increase costs, then the contractor has to challenge that and say, this is adverse to me. [00:28:19] Speaker 03: That's the whole point of the contracting. [00:28:22] Speaker 03: The contractor having to challenge modifications if it's not clear that they're adverse or not. [00:28:28] Speaker 02: Correct, Your Honor. [00:28:30] Speaker 00: And it certainly- What about modifications, again, to the underlying contract? [00:28:34] Speaker 00: Let's take a look at Appendix 1673. [00:28:46] Speaker 00: And also page 1674. [00:28:51] Speaker 00: And look at the top. [00:28:53] Speaker 00: It says, Amendment of Solicitation, Modification of Contract, [00:28:57] Speaker 00: down in field 14 description of amendment modification. [00:29:07] Speaker 00: And it's got in there the changes in the obligation. [00:29:11] Speaker 00: It actually mentions unilateral definitization as amendment slash modification on the following page. [00:29:21] Speaker 00: Paragraph one talks about hereby unilaterally definitized [00:29:26] Speaker 00: paragraph two is a result above contract price and obligation is modified it doesn't seem plausible to argue that these changes that are made to the underlying contract are not adverse to the to the contract number two that they're not contractual modifications [00:29:52] Speaker 00: which now the government has a vested interest in protecting. [00:29:59] Speaker 02: To begin with, we don't believe they're adverse to the contractor. [00:30:02] Speaker 02: They are simply the government coming to a reasonable price, which was the procedure agreed to by the contractor. [00:30:10] Speaker 00: It's unilateral. [00:30:11] Speaker 00: It's a unilateral decision. [00:30:13] Speaker 00: So it's only the contractor that's saying this is reasonable. [00:30:17] Speaker 00: This doesn't say that the settlement has been reached or anything. [00:30:22] Speaker 00: How is this not adverse to the contractor? [00:30:27] Speaker 02: Because, Your Honor, we cannot know whether it's adverse to the contractor until the contractor explains to us that it is incurring costs. [00:30:35] Speaker 00: You've been negotiating for years on this, right? [00:30:38] Speaker 00: Correct, Your Honor. [00:30:39] Speaker 00: And you don't reach an agreement. [00:30:42] Speaker 00: Are you saying that the contracting officer or the Department of Defense would not have a notion [00:30:51] Speaker 00: that this unilateral definitization of price is not adverse to the contractor? [00:30:59] Speaker 02: Well, Your Honor, the negotiations related to estimates, and based on simple estimates, there's no way to know whether this is adverse to the contractor. [00:31:11] Speaker 03: Again, there's- Hypothetically, after this unilateral definitization, [00:31:19] Speaker 03: The contractor could have looked at it and said, yeah, that's good enough. [00:31:23] Speaker 03: That's the best we're going to get. [00:31:26] Speaker 03: So in that sense, it could have been non-averse if it looked and said the government went through this. [00:31:34] Speaker 03: And we don't know it's adverse until the contractor tells you that price is too low. [00:31:41] Speaker 02: Correct. [00:31:41] Speaker 02: Your Honor, that's our belief as well. [00:31:44] Speaker 02: And I wanted to point out also that the board made a good point that a definitization being a government claim could have a negative effect on contractors because then they would only have one year to appeal. [00:31:55] Speaker 02: to the Court of Federal Claims in 90 days to appeal to the board before they've figured out whether the definitization was in some way adverse to them in terms of them wanting to submit a claim related to it. [00:32:12] Speaker 02: And as for a modification potentially being an adjustment, I want to just clarify that the way FAR 2.101 reads, though, [00:32:25] Speaker 02: Whoever is filing a claim is seeking, as a matter of right, an adjustment to contract terms, which the court noted in Alliant must be a demand for something due or believed to be due. [00:32:39] Speaker 02: We don't understand that the government changing contract terms in some ways is the government making a demand for something believed to be due. [00:32:50] Speaker 02: In fact, I'm not aware of a decision where the government was found to have [00:32:55] Speaker 02: adjusted contract terms resulting in a government claim. [00:33:00] Speaker 02: Certainly, again, we believe that this is a contract administration procedure that is not a dispute. [00:33:06] Speaker 02: And it's more like a routine request for payment, which is not even considered a claim. [00:33:12] Speaker 02: Certainly, the Air Force was not seeking anything, not seeking anything as a matter of right. [00:33:17] Speaker 02: And Your Honor had asked about the cases in which the court did find government claims. [00:33:24] Speaker 02: And this certainly doesn't fall into that field of cases. [00:33:28] Speaker 02: It's not a situation like a termination for default in which the issue of the validity of a default termination alone was said to be money oriented. [00:33:40] Speaker 02: The government is not applying a set off for damages due to contractor breaches in place way. [00:33:45] Speaker 02: It's not requiring a contractor to upgrade to a new accounting system, which imposes a cost on the contractor in the cases involving cost accounting standards. [00:33:55] Speaker 00: The board based its decision on bill helicopter, right? [00:33:58] Speaker 02: Yes, your honor. [00:33:58] Speaker 00: Basically, the board said, we have a presidential decision here. [00:34:02] Speaker 00: We need to follow it. [00:34:04] Speaker 00: But is bill helicopter still good law? [00:34:06] Speaker 00: There's been a lot of intervening factors between the time that decision was made and this action here was taken. [00:34:15] Speaker 00: The decision itself is sparse. [00:34:21] Speaker 00: It is arguably not applicable here for various reasons. [00:34:28] Speaker 00: Why should we find that Bell helicopter is adequate precedent here? [00:34:34] Speaker 02: Well, I don't believe that the court needs to determine that Bell helicopter is adequate precedent. [00:34:40] Speaker 00: To reach your position, do we have to overrule Bell helicopter? [00:34:43] Speaker 02: No, Your Honor. [00:34:45] Speaker 02: Simply, the question of the CDA's meaning and what is a government claim is here before De Novo. [00:34:53] Speaker 02: And in Bell, though, we believe it does have continuing validity. [00:34:58] Speaker 02: It specifically found that the definitization was not a government claim because the government did not seek recourse or payment. [00:35:05] Speaker 02: It simply set a price. [00:35:07] Speaker 02: And it did not seek adjustment of contract from the terms. [00:35:10] Speaker 00: If we find that it is a government claim, then we overrule bill helicopter, correct? [00:35:17] Speaker 02: I believe that it would be part and parcel of the board's decision here, which relied on it. [00:35:26] Speaker 00: If we reverse here, what effect does that have on the action before the board? [00:35:35] Speaker 00: Or if we affirm? [00:35:37] Speaker 02: Reversing, I believe the only effect could be the burden of proof that if the claim, if the entire dispute here is considered to be a government claim, then the government would have to defend its entire price set, rather than if the court affirms the [00:35:59] Speaker 02: claims will move forward, the contractor claims, as they have been before the board. [00:36:04] Speaker 00: And Lockheed has- Is there any estoppel concern here? [00:36:08] Speaker 00: Would the board look and apply any type of estoppel to say that these matters have already been decided by the Federal Circuit and they reversed? [00:36:19] Speaker 02: I don't believe so, because I believe the board would simply then have before the contractor claims a decision, affirming the board's decision would only [00:36:29] Speaker 02: said that this is not a government claim and and therefore a narrower set of issues will be before the board and it'll be clear that the burden of proof is on Lockheed Martin not on the government. [00:36:45] Speaker 01: Thank you. [00:36:50] Speaker 00: Mr. Matheson, we'll restore your rebuttal time of three minutes. [00:36:54] Speaker 04: Your honor, the sole question for us today is jurisdiction, whether there is a cognizable government claim. [00:37:00] Speaker 04: The prudential considerations, the practical considerations, those are for the far drafters, potentially considered down the road. [00:37:05] Speaker 04: They're not for our consideration. [00:37:07] Speaker 04: Why do we know that? [00:37:08] Speaker 04: Because this court told us expressly that in a line. [00:37:11] Speaker 04: They said the relief is for the board. [00:37:13] Speaker 04: The practical considerations are for the board. [00:37:15] Speaker 04: Our only question is that we, the court, cannot draw new jurisdictional lines that Congress has already drawn. [00:37:21] Speaker 04: If this is a government claim, [00:37:22] Speaker 04: then it is immediately appealable. [00:37:24] Speaker 04: We know that it's a government claim, because the Contract Disputes Act tells us the FAR definition at 2.101 tells us that it can be. [00:37:32] Speaker 04: And the definization clause is crystal clear that this is a government claim, because it is this government termination that is subject to immediate appeal. [00:37:40] Speaker 04: The claim language definization clause does not require any other contractor claim. [00:37:45] Speaker 04: Show me that language. [00:37:47] Speaker 00: Show me that language. [00:37:49] Speaker 04: In a line, Your Honor? [00:37:49] Speaker 04: Let's look at it. [00:37:51] Speaker 04: It's at page 1270, Your Honor. [00:37:55] Speaker 04: I don't believe it's in the briefing, Your Honor. [00:37:57] Speaker 00: 1270 of the appendix? [00:38:01] Speaker 04: No, Your Honor, it's Alliant at Pinsight, page 1270. [00:38:06] Speaker 00: I still didn't get that. [00:38:07] Speaker 00: It's in your brief, or what? [00:38:09] Speaker 04: Alliant has cited numerous times in our brief for many of these same propositions. [00:38:12] Speaker 04: We've stated the rule in Alliant that we cited is whether the contrary. [00:38:17] Speaker 04: The prudential considerations that were being brought up, the practical considerations that I heard from this court, I just wanted to bring. [00:38:22] Speaker 04: We've cited a line numerous times at page 1270. [00:38:25] Speaker 04: It both addresses the fact that if a government claim exists, then the contractor has the right to immediately appeal that. [00:38:32] Speaker 04: It is not a jurisdictional substitute that the contractor could incur the work and perform the price and then come back and file a contractor claim later. [00:38:39] Speaker 04: The jurisdictional substitute doesn't matter. [00:38:41] Speaker 03: I don't think any of us disagree about that, that if this is a government claim, the board was wrong. [00:38:46] Speaker 03: But this case doesn't look like Alliant to me. [00:38:48] Speaker 03: It doesn't look like Garrett. [00:38:49] Speaker 03: It doesn't look like any of the cases you cited to us because all of those cases involve the government telling the contractor to do something or give money back or in some way increase costs to the contractor. [00:39:03] Speaker 04: And an adjustment of contract terms claim is why this is important, because as we know, an adjustment of contract terms, this written modifications, adjusting the entire cost reimbursement structure, removing clauses, deleting clauses, adding clauses, it is an adjustment type claim. [00:39:16] Speaker 04: It's unfortunate this court has not had government non-monetary adjustment claims before. [00:39:21] Speaker 04: This is a good first one, because this fits on all fours with what that test can be. [00:39:25] Speaker 00: And what's really in the cases involving an adjustment, [00:39:29] Speaker 00: The remedy is provided because the facts or the circumstances have shifted, and we have an adjustment of sorts. [00:39:41] Speaker 00: But can we say that's true here? [00:39:43] Speaker 00: Yes, absolutely. [00:39:44] Speaker 00: Well, I don't know, because you entered into the contract with the government in this case and agreed that the government would just definitize the price at a later time. [00:39:56] Speaker 00: So nothing changed. [00:39:57] Speaker 00: They just came up with the price. [00:39:59] Speaker 00: And now you're faced with that price. [00:40:02] Speaker 04: Your Honor, what changed is the overhaul of the contract and the insertion. [00:40:06] Speaker 00: They just filled in the blanks I pointed out before. [00:40:09] Speaker 00: Respectfully know you are. [00:40:10] Speaker 00: The blanks are filled out. [00:40:12] Speaker 00: And you had noticed that that was going to occur. [00:40:17] Speaker 00: Absolutely, Your Honor. [00:40:17] Speaker 00: We had to change the circumstances or a recall of assets or something. [00:40:23] Speaker 00: In those cases that our government claimed, that's different. [00:40:26] Speaker 04: No, Your Honor, it's not different. [00:40:28] Speaker 04: An adjustment can be broader than what you're saying. [00:40:30] Speaker 04: And again, the relevant language is not that the government took some administrative action that they're allowed to. [00:40:34] Speaker 04: FAR 2.1 tells us the definition of claim that the relevant distinction language is whether it's a non-routine action or routine action. [00:40:41] Speaker 04: Non-routine action can be government claims. [00:40:44] Speaker 04: Here, this fits within clearly a non-routine. [00:40:46] Speaker 04: This is as non-routine as you get. [00:40:47] Speaker 04: It has to be approved by the head of the contract activity in order for the government to even make this decision. [00:40:52] Speaker 04: It's a non-routine claim. [00:40:53] Speaker 04: It is completely drastic. [00:40:55] Speaker 04: It's an extraordinary right, and the quid pro quo for the government's extraordinary right to impose a price is the contractor's immediate right of appeal that the FARC drafters enshrined. [00:41:04] Speaker 04: And so whether or not we think it fits under the 2.1 case law, there isn't a lot of it. [00:41:08] Speaker 04: What is clear is the plain language of the Finitization Clause tells us, enshrines, that if the government makes a determination, that the contractor has the right of appeal, and that language tells us that it is a government claim, because there are no other requirements for contractor claims, and the word appeal [00:41:23] Speaker 04: in the Contract Disputes Act means one thing. [00:41:25] Speaker 04: It means an appeal of an existing government, an existing claim. [00:41:30] Speaker 04: Thank you, Your Honor. [00:41:31] Speaker 00: Thank you very much. [00:41:32] Speaker 00: We thank the parties for their arguments in this case. [00:41:35] Speaker 00: The case is taken under advisement.